tv Market Makers Bloomberg December 17, 2013 10:00am-12:01pm EST
♪ >> the king of private equity, blackstone's steve schwarzman, just hit a homerun with the hilton ipo and he is here to tell us about the next big thing. herbalife financials get a thumb up from their auditors. the pyramid scheme is all a big mess. games, 21nsecutive years playing for the same team, baseball has never known anyone
like cal ripken on or off the field. good morning, everyone. this is market makers. >> proud to announce, yesterday, i was one of the four hundred 32 people this year to buy a new blackberry. have a lot to talk about. >> with the keyboard. >> two devices, still. but we have a big guest coming up. >> we do, indeed. steve schwarzman is here, chairman and ceo, cofounder of twoblackstone group, almost hundred $50 billion, investing in everything from legoland theme parks to duncan hines cake mixes and rental housing in nevada, he just had one heck of a week. $1 billion more raised in secondary offerings. thank you for coming. >> good to be here. >> we will talk about that, but i want to begin where every good interview start, with a clip
from "the daily show." >> lack stone, which doesn't sound like an evil wizards castle, but is actually a private equity firm, so same deal -- blackstone, which sound like an evil wizards castle, but is actually a private equity firm, so same deal. [laughter] pr can be hazardous to business, but those are different businesses. those are regulated businesses, you are in an unregulated business. i wondered to myself -- how much does it matter to someone like you if someone like jon stewart says that blackstone is evil? like anythingd like that. unfortunately i missed his show, but i think there was a misunderstanding on the transaction that he was explaining, where we actually saved the company in spain by investing in it, it would have
been liquidated. they do not have the same bankruptcy codes that we do. if we had not put money into this business, there would have been a lot of unemployed people. theink that now people in financial community, generally, are pretty much targets. that goes with the territory. what is most important is that you behave in a transport -- transparent, straightforward, ethical way. it, then, that people always seem to draw the same conclusion about private equity? not just about blackstone. >> you are thinking about mitt romney? >> that is one. this idea that no matter what the trade is, it always works out in your favor. in do people persist thinking this way? >> don't you want them to think that?
>> if i were one of your investors, i would definitely want to think that way. >> nothing works out your way all the time, that is not how the world is, but the private equity industry generally is fairly miserable at marketing themselves, but the fact of the matter is that the industry itself has improved companies and creative a lot of jobs and the returns that people say go to the industry really are not going to individuals, per se, they are going to the pension funds, they are going to universities and foundations, which is where those returns go. our job, consistent with doing the right things in society, is to provide retirement benefits. you are seeing it now, discussions where pension funds are having trouble paying the benefits. our job is to make sure that they earn a lot of money so that the people who are the ultimate
beneficiaries, the people who people who areg ready to retire have money, and we do that by producing much higher returns. ofhow has the lack regulation in your industry helped? when you look at where blackrock made its money over the last five years, has it changed a great deal? >> first, we are regulated. we are regulated through the sec , and then they come in and look at what we are doing. we are not unregulated. are not the same kinds of restraints. >> they do have capital requirements they have to meet. >> we do not have that because we do not take deposits. we do not have the obligation to outsiders in the same sense. looking backwards, it has worked
out, but ironically the companies for the most part got in trouble in the financial crisis, they were the most highly regulated. the ones that did not, like ourselves, as an industry we had almost no significant problems. so, i think that we have to be careful about how we look and think about these things. >> what would you say today, as you look at your percentage of wins? are they in businesses you were not in? expanded our business significantly. when we went public in 2007, we hit $77 billion in assets under management, now we have roughly $250 billion. that is highly unusual during a financial crisis and afterwards, where almost all financial institutions were pretty much shrinking and we have been the outlier in terms of dramatic
growth. >> how has blackstone continued to reinvent itself, then? thing,to say next big but i kind of want to know what the next big thing will be. the next big thing a few years ago was credit. has 63 billion dollars in assets, can you see blackstone doing something like that in another industry? >> we have a number of aggressive plans, but if we told you to the problem is everyone else would know. in finance, imitation is the highest form of flattery and we do not have trademarks and intellectual properties. so, i can ensure you that we have a whole variety of things that we think are -- let me put it -- -- >> let me put it this way. is it going to be harder to move, like warren buffett?
be big to make a difference? >> you have spent so much money at this point. >> the way we have organized, are continuings. to grow. we have wide types of areas to go into, whether it is geographic or with new products. part of the reason that is important is to give our star younger people something to write. this way, we can keep growing and we do not lose people. we develop areas with high returns for our limited partners. place.ld is a big globalization has opened a lot of opportunities for firms like ours. we regularly take advantage of those. >> your biggest win happened right here in hilton. this is not a typical private equity story. this was not restructuring.
this was you repositioning and growing a country -- company. are we going to see more of that? >> this is basically what we do in private equity, we are somewhat mischaracterized, but this is a situation where we bought this company at an admittedly high rice at that point in the cycle, there was a lot of consolidation, they were running three or four separate businesses. it was a great opportunity to expand outside the united states . merger of two companies. the foreign company had not aggressively expanded at all. our plan called for opening a lot and we have accomplished that type of execution. >> but it is not just in your real estate business. did you not have hilton investments across all funds with lp partners? >> it was a giant sized investment and part of what is important when you make
investments, everyone that you make you think is going to be right, that is not always how it occurs. what we did is we allocated that investment to different parts of the firm where it was appropriate to do so. >> let's go back to the point that you made at the outset of the conversation, the idea that these private firms are not great at telling the world about the good things that they do, including growing businesses, turning them around, making money for pension funds. do you be -- do you feel that as an investor you need to or that ?ou have already changed in order to leave people with that impression? you know full well what people ,hink of private equity markets but that you need to make these different kinds of investments that can create jobs where you take a company public without selling any of your stock? so that you are not immediately trading on it?
does that help, to leave people with a better view of what blackstone is? >> in terms of what we do, we have a clear idea of what we are trying to do, which is add value and grow the business, creating jobs. and we do that. statistics on the industry have and arel studied apparently not repeated by other people, they just go ahead with whatever they feel like saying. but it is pretty clear. >> do you not find that unfair? >> it is unfair, but life is somewhat unfair. we have to make our case not that we are inventing reality, but just putting it out there. we are proud of what we do is affirmed. the people are proud. the people who give us large amounts of money are very happy with our performance. a big emphasis on green investments, especially in
the energy area. even with our companies in terms of preserving energy, you know, we have a very large footprint, if you will, just in our private equity business, which is one of our seven business lines, we have $120 billion in revenue, 80 companies, 740,000 people. doings not a few people some deals, this is like a major industrial global enterprise. we operate with best practices, because that is good business. it is the right thing to be doing and it is certainly working out for our investors. >> when we come back from commercial break we are going to talk about something for your firm and your commercial investors. washington, dysfunction and washington, d.c.. >> another setback for bill ackman and his quest to prove is or is not a
>> there is some breaking news in washington, a key vote is underway in the senate that concerns the two-year budget deal between paul ryan and patty murray and it appears that it will get the 60 votes needed to proceed to final passage. peter cook is on capitol hill. >> the vote is still under way at this hour. going in we knew that there were only seven republicans that would vote in favor of this legislation. i heard a couple of boats on the floor, you can add to that total nine or 10 republicans supporting this. people on the fence before now saying yes, as did bernie sanders, who had been on the fence because he did not think
that this did enough to help to loses who were going their unemployment insurance. this bill is about to advance to final passage in the u.s. senate, taking off the table for two years the threat of government shutdown, does nothing on major issues to the deficit, but it at least amounts to a cease-fire and gives some cover to the business community going forward. much.er, thank you very let's return to our conversation chairman, schwarzman, ceo, and founder of blackstone, the world's largest alternative asset manager. you have been outspoken on political issues before. several weeks ago we were talking about the rancor and discord in washington, saying it felt like it had never been worse. now we have a budget deal. is a good thing. i guess it was two weeks ago and i ran into paul ryan
patty murray, they were both very careful about talking about how they were keeping a secret, what they were doing, and that they were working hard to get something done. and they will. it is not a big deal in numbers, but it is good to sort of change of dialogue. >> you think that the gesture is big enough? >> as i said, it is not a big financial deal, but i think that there was a desire in washington -- the system was clearly not working. every poll that comes out, from every network and every pollster, shows that the folks in congress and the executive branch are really suffering. if 70% to 78% depend on the pole in america and believe that we are on the wrong track, let's assume
that that is the case. either the people in the government are going to change it, or the american people are going to make some changes. >> what does it mean for you, practically? that the tea party is not hijacking the republican party? can you get kind of the republican party again? >> i am not the world's expert. but i think that from looking around the world, whenever there are big moves, either to the right or to the left, you tend to get a counterbalance move on either side. you get a society politically that does not work as well. i think there will be adjustments that occur. the public wants those adjustments and once a government that functions correctly and accomplishes
business on behalf of people. you cannot leave the country with a perception, which is true , actually, that we are on the wrong track. it will be corrected. americans are practical. decisionsmake certain to ensure that we have a normal functioning government. >> is there something you would like to see as president who can fix all of this? we have heard from people in the industry who think that chris christie is that guy. think it is early. america is a volatile place. a lot of people over the last decade have been announced as being the next president who, in fact, are not, or were not. so, i think you have to get closer to that to figure out what america is really looking for. are in a position to get behind someone in a
significant way and help them along. is there someone you are seeing who you think could be great for america that you could get behind? do that early for me to on your show. >> you could try. >> i know, that is the job. >> here is a question you can answer, what is your relationship with the white house like? have they reached out to you? do they understand better what they want or what you want? >> they made a big effort over the last year or two. i see the president actually with reasonable frequency, through either of the organizations i belong to. they are trying to get behind some things that are important. i can always support things that are important. you and the
presidency i to eye? >> the whole concept of immigration reform is something we really need to do. the idea that we educate, for example, foreigners, give them phd's at our best schools, and then do not allow them to stay here anymore and shipped them back? then they go into competition with us, combined with the fact that we leave our money offshore , this discourages money -- companies for bringing it back to expand with capital that should be coming back here, with workers that have been trained in the united states? it is almost deranged. so, things like this need to be good forcause it is america. on the issues like that, i look at my role sort of as someone in the business community who says
that the president thinks that is a good thing to be focused on? i happen to think it is a good thing to be focused on. some of the details are up to political people to fight about on the margin, but that is not my fight. but accomplishing it and being positive on things like that? good for america. >> we need to take a quick break , but we will continue in a few moments with steve schwarzman. >> when we come back we will be speaking about china, from blackstone investments to steve's well-known scholarship program. that and more right here, when we come back on "market makers." ♪
♪ >> a little more breaking news for you out of washington, the senate voted 67 to 33 to advance the budget deal to a final vote. later this week this procedural means that final passage is all but a done deal, but we will have to wait for that to happen. it will happen this week. >> we are back with steve swartz , ceo and chairman of blackstone . earlier you mentioned pension funds. often time people look at
revenue equity in the abstract, do not think that they can get involved, but you have a growing focus on retail investors. how is that working? >> pretty well. we basically offer the same kinds of products to institutions and we have had rapid growth in that area. in the last year we have raised about $7 billion from retail investors. >> how small do they have to be? when i think of people who just open up an account and they buy apple stock and can suddenly invest in blackstone? >> they can buy our stock, which is a separate thing, but usually there are restrictions of size, though there have been changes in the laws to break into small changes, down to 50,000. we do not specialize in that kind of grown frome have roughly $600 million per year in 2009 from retail to $7 billion
per year. this is another one of these massive scale ups that we are doing. >> how big a deal, alternately, can retail investors be? >> retail investors are way under allocated. bearge institution would 15%, sometimes 20% alternative products, which historically have averaged, firms like ours, somewhere around 1000 basis. if you get an extra 10% on return, you would want to put more money in these types of products. retail investors, typically, are only one percent to two percent of their total -- total portfolio. so, it makes sense for them. >> what about the liquidity? >> illiquidity is not a bad
thing. liquidity, is, in effect overrated. the premium in terms of return for illiquidity is so much higher. no one needs 100% liquidity, typically. >> how often do you have to explain that to people? in 2008 all the people cared about was liquidity. do you have to explain this over and over? >> you do because investors do not always do the right thing for themselves. one of the advantages of being locked up, in effect, in our types of investments is that you can take investments that go down abnormally in times like that and stay in them so that they go up. one example of that type of approach, many investments are like that. people tend to panic near bottoms and be overly enthusiastic at tops.
what we do for them is make sure that that does not happen. >> i want to talk to you about china. you have spent a lot of time creating the program schwarzman scholars so the 200 people per year can learn about what you think is the most important country for the next 50 or a hundred years. what do you think of the new leadership in china and the job they are doing confronting that country's biggest challenges? ofchina has got a lot issues. it is not a wealthy country, it just has huge reserves, but it is around 100 in the world in terms of per capita income. aere as we look at china as rich country, they do not see themselves that way. they do not really have a developed social security system, which is a surprise, i guess, for a country of that type. they do not have adequate medical care.
are a lot of fundamental things they have to address. >> more and more the chinese people want those things? >> of course they do. a variety of other things have grown up there. the new government is interesting. these are pretty get it done kinds of people. pretty courageous. they understand the problems they are dealing with and have laid out, in this recent plan, they call it, a whole series of things that they want to do over the next nine years. difficult to bet against. >> do you think they can do all those things? >> jim chanos thinks so. >> he has his views and i think he is always short, so i cannot really talk about him, but they are still apparently growing.
seven percent, eight percent per year. will they accomplish everything? who knows. do they have a fundamental thrust for reform, for diminishing corruption, for addressing the central issues? some point developing convertible currencies and things like that? this is if it -- group that is very focused. part of the issue of not being a democracy in the western sense is that you can do some things that may not be as popular that we could not execute that may be useful for them. the key question, is it an acceptable trade-off? >> that is one that we should ask the philosopher king. i am probably not that person. .here are horses for courses at their stage of economic and
societal development, certain things need to be addressed. part of what comes from their system is alien to ours in terms of certain types of freedom of expression and so forth. i think that the world is a more pluralistic place than we may look at it. each system has some very significant advantages. >> let's say that people agree with you on the importance of china. and frankly it is hard to argue. not everyone is going to be a schwarzman scholar. >> what is the number? 201? >> i guess you have to hope that someone gets sick. >> seriously, what would you advise people to do? the people who agree with you, who care about china, who want to make understanding that country part of their education future? >> looking forward, i just had a
breakfast meeting with someone who covers that area for another firm. not an elective course, it is core curriculum. you really have to know about the number two economy in the within 20 years, in all probability, will be the , with mosteconomy probably the largest population in the world. it is a bit of an alien culture, certainly to westerners. the language is much different. the history goes into over 5000 years. and they have a point of view and culture that is different than ours. to not find a way to understand that, whether it is going to school, part of working at a company, having a rotation to asia, to china, to not touch
that part of the world is like a real fall short. >> phys ed, algebra, trig, and china. everyone out there needs to know it. steve, always great to get your thoughts. we come back, bill ackman may be down, but he is not out. fanning the fire after another setback in his bid to land -- to prove that herbalife is a pyramid scheme. ♪
>> it was one year ago this week that bill ackman made a public one billion-dollar bet against herbalife, and it has not turned out so well. since he first called it a pyramid scheme, the stock has doubled. he has lost as much as half of a billion dollars, though he claims he will be proved right eventually. yesterday he suffered another setback, another audit of their
financials found no material errors. herbalife raise the price target to 119 million dollars after the news. first of all, christmas came early, you were right, i was a skeptic. clearly, i was wrong. what does this audit tell us? >> a great deal, first of all. the stakes were elevated so high wemr. ackman, in a great way owe a huge debt of gratitude to him. the vetting of this company has been incredibly complete. yesterday he said it was not the purview of an audit firm to investigate pyramid schemes, but he knows that nothing could be further from the truth. hold on, i am giving you full credit, it is great, but clearly you do not really appreciate till ackman, saying that you owe him a huge bed of
gratitude -- a huge debt of gratitude. >> i do. the stock is up 130% and we appreciate it. what he has done is cause the complete vetting of this company that will allow this company to maybe 35think 25, 30, in multiple, where it should be. it should be priced with growth stocks. way, yes, we owe him a huge debt of gratitude. his claim yesterday, which was absurd, it is an auditors purview -- >> i am actually going to give you the quote here. not the role of herbalife's auditor to determine if the company is a pyramid scheme. the few that make money earn the vast majority of their profits from recruiting. herbalife is a pyramid scheme that will be shut down by regulators."
i know you want to comment on that. >> absolutely. both the audit committee and auditor are to investigate allegations of illegal activity and you can bet that this investigation has been thorough, complete, and is over. >> are we going to see an lbo? >> i am not sure about that. it is possible. is quitenk that it likely we will see a significant share repurchase. but lbo is hard to analyze. that is a binary event. >> for you if there is an investor call tomorrow, what do you want to know? >> i am primarily focused on growth. the story is to get people back focused on growth. we saw them quadruple sales in china over three years, it was just stunning. 300 and $50 million to $1 billion in sales. we think that herbalife is on the same path.
it showed a 77% sales increase in the third quarter. my job, right now, is to get back to business and focus on the growth of this company and get growth stock investors to look at the opportunity. had ag on stocks, they few things to say about where they thought the company could go on a growth perspective. take a listen. >> you have this large cohort of the unemployed that might be unemployed forever. this kind of new normal of the natural unemployment rate in the world, you look at these countries with 50%, 60% youth unemployment, from a timing perspective this all played into something that fits into a macro ideology. >> do you think that youth unemployment has connectivity to herbalife? i am not sure if it is used, but it is certainly the search for an opportunity.
boy, when i go to these huge extravaganzas, i go to about one per year, i cannot stand to many of them, but these people are so energized and excited about the role that they play as entrepreneurs and in control of their own destiny. they might only be making $50,000 per year, $30,000 per year, but they could not be more proud of what they accomplished. that is the role that i see mlm's playing. >> that is where i become a skeptic. you only go to one or two of these per year? why? for me it feels like a bizarro scam. when you are there do you not like it because it just is cheerleading? >> it is absolutely cheerleading. it is almost a religious experience. these people are the faithful, for sure. i do not need a lot of that to get up to speed.
year, i go.ce per like lucky for your family, no one has to get you a christmas and it, i was doubtful was wrong. merry christmas, tim. coming up, baseballs iron man wants to make sure that the future will -- future hall of famer's will have a place to play. we will be speaking with the one, the only, the legendary cal ripken.
your whole career. you have teamed up with other athletes in philanthropic organizations. what are you doing here? what communities do you plan to build these parks in? ultimately, what do you hope to accomplish? >> we used the foundation to get in front of kids and teach them about life, creating the programs to help them, but in the progress we found that there were -- in the process we found that there were not these safe places to play. this hasy to say that really taken off, it is transformational. we will have 26th of we will have completed by the end of the year. the capital campaign is really about raising the money up front so that we can be more aggressive in other communities. our goal was 50 in five years and it looks like we will surpass that tom of which is exciting. we have already raised 18 million in the silent phase.
we hope to raise the rest by the end of the year. >> what is the ultimate goal for the foundation? to take this to other cities across the country? >> it is in areas of need. when i said earlier that these ballparks are transformational, when they go in the communities embrace them. they cost $1 million a pop, so they ought to be nice, but they are protected as safe zones, pushing the element, the bad influence further and further away. the rest of them sort of react to this wonderful place. it gives the kids an opportunity and a chance to play outside and learned the values of sports. >> could the work you are doing have an impact when it comes to major league baseball? less and less young people are watching these days, if you look at the numbers. arehe kind of work you doing to introduce this into more low income areas, could it have a positive impact on low income ball? >> possibly indirectly, though
that is not our intention, and this is not a new idea. you can use sports to appeal to kids. i am surprise when we go into these neighborhoods, i would think that baseball was everywhere, but sometimes they hold the bat wrong, you have to turn them around. but the magic of baseball compared to other sports, in my opinion, you do not have to be the biggest, strongest, or fastest. sometimes the littlest kid is the one with the best talent for hitting and it is interesting to see their confidence raise up. yes, you arene promoting baseball, but it is about getting kids interested in something productive. >> what kind of bit -- what kind of example is major league baseball setting these days? ,-rod, steroids, the fallout all of this from florida, surely this is not something to look up
to. >> it is a black cloud and something that no one is proud of, but the positive side of that is they are doing something about it, trying to rid the sport of that. you touched on an issue that is interesting to me, people always talk about this being bad for baseball and all of that, adults can process that, understand that, warm their own opinions, but kids really cannot. i was worried more about how kids perceive that as right or wrong. often when i am in front of kids i ask them -- what do you think of steroids in baseball? do you think it is right or wrong? virtually 100% of them say they think it is wrong, which is a good first step to knowing what you have to do when freight -- when faced with that choice. >> as eric said, you are the all-american baseball player, true to one club. we never see that. seems like everyone is a free agent trading here, there, and everywhere. what does that say about the
brand of this all-american sport? >> it is a great rant. small bunting on the final parts of the game, as it gets cleaned up it is not easy to play for one team. i was one of the lucky ones. understand theo place of value in where you want to play, but most players would love to have what i have, the chance to attach themselves. i would love to have what derek jeter has, where he was in the playoffs virtually every year, but that does not always happen and the movement of baseball can be confusing with all the different trades, but i think that most players that play would love to play for one team. >> great to have you here, right to hear about your initiative to build more ballparks for underprivileged kids. he is the baseball ironman, cal ripken junior, with us from baltimore. we will be back with you in just a couple of moments.
>> live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. screen ipo, american movie icon amc is set to go public. we will focus on what a successful debut will mean for seats under the chains, chinese owner. >> miramax has never seen an act like this one. the weinstein brothers are trying to figure out how to make tv shows from the movies they made in the first place. >> security in the fast lane. the family that controls bmw by the company that protects billions of electronic
identities. we will see what that says through online transactions. welcome back to "market makers." i'm stephanie ruhle. >> and i'm erik schatzker. here in new york city we will talk about the top business stories in the world. one of the world's biggest drug makers has made a big change in the way it promotes its products. noxosmithkline says it is longer going to pay doctors to push drugs. start paying its sales force on the basis of how many prescriptions it will right. except called both practices conflicts of interest. in new york today, the insider trading case of michael steinberg. he is accused of using illegal tips to earn one point formally and dollars in profits in steve: 's hedge in steve cohen fund. a california judge ordered sherman williams, conagra it
industries to pay $1.1 billion to contain lead paint in homes. several counties have filed a public nuisance suit. the company plans to seek a new trial. >> and happening now at the white house, some of the nation's most important technology executives are meeting with president obama. we are talking about apple's tim mayer, and many, many more. oh, to be a fly on that wall. julianna goldman may not be inside the building, but she is right outside. what is on the agenda i? >> they are in the white house right now and we should be hearing from the president. he will bring in a group of reporters at the top of that meeting to make if you mark -- remarks. -- to make a few remarks. what is interesting is that we have learned that the white house had asked these ceo's here to ask for opinions on the
health carete house site. they said, no, we want to talk about surveillance. or we will not be coming at all. oh the white house gave in and that is at the top of the agenda. nsa are under fire for the spy program, facing billions in overrs in losses regulation, and a general loss of confidence in their product. it is probably going to be a very frank discussion. a try to clap -- cracked open window and climbed in. we want to know what is really happening. it is almost lights, camera, action for the amc entertainment company. the theater chain is gearing up to price its initial public offering. this comes a little more than a year since it was bought by china's second richest man. este mallette she is back from
her fabulous south american vacation. is back fromlesci her fabulous south american vacation. tell us about this deal. it could be a blockbusters for investors., how about those in the movie seats? >> from the investor side, it seems this deal is being viewed quite well, not because it is a huge growth story, but because the stock will play -- pay a dividend like its peers. the investment potential is not for explosive growth, as we know the challenges that have set up on movie theaters as of late. the dividend is the focused. -- is the focus. it is not going to be about getting more people into the theater, but about getting people to spend more when they go to the theater. >> and what are they going to spend more money on? people walk in and by the jumbo popcorn, the giant drink. what else are they going to get,
a hot and not chose? >> not a bad idea. it is so gross. >> the chief is like plastic. is like plastic. >> one of them is getting you to eat a whole meal while you watch a movie, which could be even more gross. i have not decided. he have opened up kabul of these theaters and they say they will open up even more in the next five -- they have opened up a couple of these theaters and they say they will open up even more in the next five years or so. the third richest man according to our rankings for my in china. rankings, into our china. he said he wants to open -- own 20% of the film distribution industry worldwide. ist he wants to do potentially gain some leverage with hollywood. hollywood really has not written
into china yet. leverage get some around the world, then maybe he can bring hollywood into china and get better pricing in theaters. it does right now, the studios have the leverage. >> you know who can tell us more about china's third richest man, he's sitting right beside us. thisrday, the guy who owns tense and media -- >> yesterday, saiduy who owns $.10 media this happened last night. >> tell us more about this guy. >> he is worth about $12 billion. he is mostly a property developer. $10 million of his fortune is based in property but -- property development and apartment source. he is branching out into entertainment -- property development and department
stores. he is branching out into entertainment. >> is his goal to hang out with models and actors? >> in countries like china where you have to get some of your money out into other markets and asset, he is diversifying his fortune. how does the ipo affect him? >> all of the proceeds are going to pay down the debt. was flip-flopped through private equity firms for many years and as a result, has way more debt than even its peers. all of that money for now is going down to pay down debt. subsequent offerings may go to renovating these theaters and making them more sleek. >> but the valuation will tell us what his stake is worth. >> exactly. the valuation will tell us what his stake his work. the midpoint of the range is that a discount to his peers out there.
this is because of the amount of debt and potential for slower growth. not to mention a lot of theaters are an very exclusive markets, like new york. the margins on amc's business are actually quite lower because they have to pay higher rent. >> but we love this kind of transparency, especially with billionaires. >> and with asian billionaires. you can get the opportunity to see how it works. amc ad $2.5 million for few years ago and now you get to see what it is worth on the open market. >> any big mistakes? hold on, how about your boots today? >> thank you. >> any big mistakes that you think he has made? >> not that i am aware of. we found out that he was china's richest man a couple of months ago, but -- china's third richest man a couple of months whenbut previously know new that he actually -- no one
knew that he actually owns so much of his company. >> i will tell you that people in hollywood and those close to those in hollywood say that he has actually angered some of the studio executives because he has been so bold and cocky about how he's going to disrupt this business. it actually has not played out that well for him in hollywood yet. that could change. >> a drama fit for the movies. core shoe choice for you both and i would say. >> thank you. >> i want to give you additional props. there was a story out on bloomberg.com today that you absolutely have to see. matt and his team have rewritten the history of -- yes, canadian well. [laughter] >> when we come back, hollywood's weinstein brothers are going back to the future.
>> the weinstein brothers are hollywood revolutionaries. in the 1990s, their company, miramax, released a string of culture defining hits -- pulp fiction, good will hunting, and shakespeare in love just to name a few. they were purchased in 2010 and has not -- have not released anything. instead they have been looking at distribution deals. now the weinstein's are coming back to miramax and they plan to make new movies and television shows based on those they have already made. what might the new content look like e let's bring in the senior
writer -- what might the new content look like? let's bring in the senior writer. >> you might see some tv shows come out of this deal. they have already hinted at that. and maybe some films as well. if you put these two stories together, financially the new owners of miramax were in the position where they may have made some pretty good money because there are all these new homes for miramax. the problem is, if you are not making movies tied to a library, sequels, whatever, it starts to get a little bit say -- stale. value of art the film library. they have explored different options. the obvious one was to partner up with the weinstein brothers again. a lot of sentimental value there. the weinstein brothers have a 20 year option to go out and mind the library and make some films, bring fresh activity to the
world of miramax. >> why do the weinstein brothers want to do this? they have their own company and make their own films. >> it is all upside, the way this is structured. >> for whom? >> for the weinstein. they are not financing. they are eating distribution fees and a percentage of the profits. and it is a homecoming story. this is a company that bob and and itweinstein founded is named after their parents. it is of emotional resonance to both of them. the lastscribed to me scene in the raiders of the ark were the arc of the government -- the arc of the cover and -- of the covenant is being wheeled into the warehouse, it is emotional to him. i think he thinks there is a lot of potential in this intellectual property to mine it in new ways. we seei -- how might
this? >> certainly, television shows. he seems interested in doing a television show based around the characters from good will hunting. is in that content dated? >> it could be dated, that is a risk. but if you look at something like mgm, that is a company that is basically building its business model about a library, going and revitalizing library sequalizingalizing -- them. comic bookou look at heroes, they live on in history. but if i dig about "shakespeare in love" or "swingers," i'm not sure those could be told again. >> i think you're right. no one could say that "the crying game" is "the dark knight." i'm not sure there is a sequel in that one. >> if there is, i don't want to see it.
>> but these people, they know this material better than anybody else. they have great relationships with talent. harvey weinstein said, if there is going to be something from good will hunting, you better believe ben affleck and that damon will be involved. -- matt damon will be involved. >> you are in l.a., jon they need why did their special sauce tackle on their other guys in l.a. that can put up great stuff -- their special sauce? aren't there other guys in l.a. that can put up great stuff? click the owners of miramax are not movie creators. -- >> the owners of miramax right now are not movie creators. they have made money because they took the library and cut deals with netflix. they have been thinking about the next option. at the end of the day, maybe this was the best option for them because harvey weinstein
probably would have been , to your point, if there was some kind of sequel to the crying game put out by another studio. that is a concern that he probably had of someone else were to make these projects. he had a lot of exploring of options by miramax. maybe this was the best option on the table for them. that is why both sides feel good about it. >> even though this is a good deal for the weinstein, would you say for -- the say the same for tom barrett and colony e >> i think tom it -- tom barrett could make some movies and breathe life into these franchises. then they could make new deals with digital platforms like netflix. what,en say, hey, guess
we have been doing some pretty good movies and we are set to earn a little bit more money. that is the reality. the value of a film library will decay if nothing is happening, and nothing is happening at miramax. >> i would go see swingers. weinstein have been making films of their own at their company for quite a few years already. that -- does that mean that if it is not a sequel or a new show, miramax will not be making that theyf art films make at the weinstein company? >> i think the plan right now is to take existing intellectual property and figure out new ways to repackage and reconfigure it. you are right, i don't think the plan right now is for miramax to be developing new material. if they are serious about being a major studio, that will eventually have to happen. >> from the weinstein's
perspective, could miramax be ,here sort of cash machine commercial, were you just grind it out and make dollars and the weinsteins creates stuff? >> it is a safer bet for them. they will be taking more financial risks under the weinstein manner. this is a way for them to get into television, and into stage production, which is another thing they are interested in doing, with fairly minimal risk. >> you are dying for the heather's musical. >> i'm excited about it, actually. i might get cast in it. >> you might have to dye your hair black, though. you both. , colonyst a few minutes capital's john barrett is joining us. theill be asking him about deal with the weinstein.
sintering almost twice as much code as americans drink. -- mexicans drink almost twice as much coke as americans drink. drinksw tax on sugary goes into effect january 1, but analysts are forecasting it is not going to have a lot of impact on coca-cola. average shares of the company will rise 19% next year. today's latin america report. >> we are approaching 26 past the hour. it is time for bloomberg to take you on the markets. we are looking at the u.s. market and we are actually down slightly today. the s&p is down almost half a percent. no one seems to like the snow and they do not seem to like the markets either. >> i want to take a look at irobot. this stock is up 20%. you could call it the google effect. eight robot companies google has bought in six months. raymond james raises irobot 285.
is there a robotics sector? -- raymond james raises irobot to a buy. is there a robotics sector? i guess there is. >> and french year commit occasions rising after degrees to a buy. the market seems to like it. >> you love that green stuff. >> i do. back, turninge your smart phone into a virtual smart car. -- smart card. virtual security business. >> and also when we come back, a movie mogul is not just a real estate guy. that is coming up next. ♪
>> live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. card played aa key role in replacing transactions with card swipes. now the credit card company is ready for the next step. data card is buying digital security to speed its move into digital transactions. they manage billions of electronic identities, including the majority of credit and debit cards in more than 100 countries. today, we have todd wilkinson, the ceo of data card, and bill connors, the ceo of interest on "market makers" to talk about
this. you are no small source -- small force in financial services. you have half a billion in revenue in citigroup, morgan chase, governments like france. why do you feel like you need to take this step? >> we are really excited about bringing interest and data card forces. to combine between our two companies, we bring both physical security as well as logical security for both identity and infrastructure. >> explain what is going on here. for 40 years or so, you have been supplying banks and government offices with renting equipment, stuff that effectively prints, personalizes plastic cards, debit cards, id cards, passports in some cases.
what are your customers doing that has led you to this decision, that i guess you need to follow them into the digital world? is that right? >> our customers around the world are looking for ways to do secure transactions over mobile devices. we have been working on that for some time. combining with and trust, we bring digital security and digital id. a link of mine that with what data card does now for our financial customers and government customers globally, new solutions to enable those capabilities. >> i mention that people don't know data card particularly well because it is private. our firm, in trust -- entrust, has been private for some time as well. >> we have already been partners in the world for passport ids. everything has gone chips now. passports, national id cards,
chip and pin dumbing into the financials in the u.s. -- coming into the financials in the u.s. are bringing security to that ship for your personal information, so you can have a there identity and reduce secure transaction, whether it is mobile, or with the smartcard on the mobile. citigroup, for example, be able to do in the future as a result of what both data card and entrust do today? >> i can bring smart cards and mobile together. vendor and save a lot of money. externally, i can look at all the financial transactions that consumers or high net worth corporations are trying to do. now they have multiple ways to secure them through a card, like a bank card that todd has talked about, or through mobile devices and authentications that we have provided.
>> the digital transaction business, how fast is a growing? >> it is growing substantially. the domination of our two companies in a market that i see for securing digital identity is tremendous. this is a significant and strategic step forward for us. we see growth for many years. >> talk to us about where data card is going next. you are owned german billionaires with deep pockets. is this direction that we will see data card going for the future? will you do more acquisitions, for example echo what ambitions do you have -- for example? what ambitions do you have? >> we want to serve our customers better everyday. the additionaly capabilities to financial and government customers. we have been privately owned since 1987. we have the luxury of having owners that have a long-term view in terms of technology development and generational wealth building.
gives us a platform to build a longer-term investment for our customers that will bring new products and new capabilities from the combined entities. perhaps something entrust could not focus on in the last couple of years. december 31, you're out of a job. what next? >> consult with todd for a wi- lan probably work with some private equity firms -- consult with todd for a while and probably work with some private equity firms on security. >> the company being sold to data card. thank you for joining us this morning. when we come back, hollywood's weinstein brothers are singing and new tune. reunited, and it feels so good. we look talk to one of the merrimack's owners from colony capital, tom barrack. stay tuned. ♪
lex we talked earlier about the new miramax pictures with bob and harvey weinstein, new partnerships with the studio they created. you can expect movies and television shows based on the shows that made them so famous. swingers and shakespeare in love are among them. it private partnership bought miramax from them in 2010 and colony capital is the lead investment -- investor. tom barrack joins us now live. you know i like to say that the smartest minds are not in the entertainment business, but you being known for a real estate guy could not resist will stop why did this make so much sense? >> like all financial guys, i was lured into it by a beautiful, gracious, charming woman that i could not resist, which was harvey's mom, miriam. she needed the name back. seriousness, it is really
simple. ,his message is pretty basic and i've been a librarian, not a moviemaker. when we bought miramax, our partners, qatar holdings, which is a very strictly sovereign wealth fund, we looked at it. intellectual property is the new bricks of the future. it is just like an office building. you keep renting in two different tenants, and overtime he does not appreciate or depreciate. but it keeps the market affect moving. at some point you need to create the scent of new product, so the buying community which is exponentially larger than it has ever been has something new to put in its basis. both -- because with harvey who has been a longtime social friend of mine, it was like living with his children before we dated.
we have 250 projects to be developed. we knew very well what they were about in the creative department, which is not simple or easy, but if you think about it, it is like living on acres of diamonds. the product that we have within our existing library, plus the 250 development projects, which harvey and disney, two of the best moviemakers in history, spent something between $250,000 and $5 million on each of those projects, they were the key to development. it is our first step back into production. it is not our last step. there are many other things that we intend to do now with qatar holdings, now that we -- once we have gotten our feet underneath us in the business, so to speak. if you look at the big studios, they are mostly owned by come along mauritz. -- conglomerates.
silos inof them are which moviemaking studios have to sell their rotted to a disturbing silo. their -- have to to sell their product to a distributing silo. that leaves the other silos. all 14want to watch episodes in an afternoon, you choose to have it on your iphone, ipad. curious both of why did you just -- structure the deal this way? company withone miramax and give harvey and bob a real stake back into the business they named after their parents? and then you, too, could work with them developing the new cool, trend setting, artsy films they are so good at. >> that is always an option.
>> is that an option moving forward? you talked about it and might do something like that? basics.art with the the basics are the financial partnership that is easy to define. the balance sheets are difficult and shareholdings are difficult. companies, they have done a good job in the last several years and have stabilized their balance sheet. miramax is a different kind of company. it has been a librarian printing cash flow. are not interested in merging at the moment, but have ever interest in making the content work. but there are many things we can do down the line. we have a strong art and are. and now a great -- we have a strong partner. and now a great entry into this. >> do you run the risk, though --
do you run the risk that because bob and harvey are not all in, because they have their own entity with their own name on it that they are saving their good stuff for their own business? and that miramax is just a great cash register for them? is thatood news for us we are not quite as naïve. this deal has been in the works for nearly three years. when robin i first had the idea to acquire this library, our first call was to harvey. the man who created the rubik's cube is the one to unwind it. years, we for three have been romancing each other and figuring out foolproof ways on both sides for us to do what is cumulatively the best thing for each other. where we are is a great deal for us, a phenomenal deal for them. we will take it step-by-step and see where we go. >> while we have you, as much as
we love talking about entertainment, we have to talk about the business you made yourself a missing, real estate. a great deal for blackstone last week, the hotel deal. one of the questions we did not get to ask steve schwartz earlier that i want to ask you looks like ae great deal until you talk about exiting. how does one get out of the business? wetjen, and the answer is, nobody knows yet. question, and the answer is nobody knows yet. rental housing is the single largest asset class in the world at $21 trillion. single-family rental housing in the u.s. is 14 million units. when you talk about single- family rental as a business, blackstone, ourselves, american homes for rent -- there are maybe five big companies and perhaps together we own 200,000
units. it is nothing. it is less than 1.5% of the rental units. thing in thee 1990s. people bought rental houses cheaply, which we all did, and then rent them and flipped them. home appreciation is about 25% to date for all of us from where we thought. but that is not the name of the game. the name of the game is to turn it into an asset class, just like multifamily. they are trading today about books, may one-times book. trading about 2.5 times book. years, we will prove up the fact that the income off these houses is exactly analogous to the multifamily business. lactic -- blackstone did something else billions, which is to discover the cure today she on the portfolio they own.
allows those hold units to turn. nobody is worried about an exit. we are proving up the business, the growth, the net income factor, and everything is rolling towards rental versus single-family. >> how much longer can it grow? america.ust here in are you looking at doing something -- could it work in europe even? can work in europe. the difficulty there is you have a different -- different legal system and a different finance system and a different cultural system. single-family rental in europe is mostly secondary housing. it is a different kind of marketplace. u.s.here is enough in the to keep us busy for a long time. regardless of what happens in fannie or freddie, regardless of the transition from dimarco to risingegardless of interest rates and what that does to affordability, you have
1.5 million new households all looking for a place to live. what we found out with the single-family business is that families want to live in houses. single-family rental is an option, which they've never had before. there is been no institutionalization of single- family housing until now. it will continue to be a viable option, regardless of whether we are buying at unbelievably cheap prices. >> tom, thank you for joining us. whether we are talking about real estate or the movie business, he is one of the leading minds on the west coast. and he gets to live in california. it's snowing here. thank you for joining us. >> we will be back in a couple of minutes. "market makers" is not done yet. stay with us. ♪
the markets. i'm olivia sterns. stocks are moving lower right now. this follows yesterday's rally. investors are weighing the inflation data and what it means that the fed may start to taper. we will get the decision tomorrow on whether they decide to pull back on stimulus. one third of economist do think they will start to. it is time for today's options inside. facebook shares are trading at all-time high. the social networking giant was added to the s&p 500 last week. joinsf market strategist me with his bearish strategy on facebook. sus kahane put out a note today they raised their rating on facebook. they said there are a number of levers here till like on the stock. they raise the price to $68, but you think it is going lower. why? x first, i don't dislike the
stock. where it is sitting right now is a person -- perfect opportunity. about $55 and selling up. it looks like the last tie we made. 68, not think it will go to but i think it will come back down to 44 first. i want to be short the stock, but i do not want to take a lot of risk. i'm going to sell the january 55 , $57 $.50 call spread. that will create a credit. will be about one dollar. i will do that twice. i will collect two dollars in premium. i want to put that money to work for myself. i'm going to go back and by the $52.50 january put for $1.50. i have a net credit of $.50 now. >> the stock has to go below $48 for you to make five dollars. >> that is right, but if the stock since here, i still make
$.50. if the stock does nothing, but stays below $55, i get to take all the credit i took in. 50/4750ot just by the put spread? thehen you do the credit, stock does not have to do anything. the beauty of this trade is if facebook just a tear for the next month, i make money no matter what. here for the next month i make money no matter what. i don't have to be right. the only thing about the strait is that i cannot be wrong. as long as i'm not wrong, i will make money. >> and the $.50. pre-k's if the stock stays below 55, i get the 50s -- >> if the stock stays below 55, i get the 50 cents no matter what. >> there is also the news out today that facebook is out
testing video advertisements. they will start running video ads in users feeds leader this week. doesn't that make you change your outlook for facebook e should not be a tort -- a short- term catalyst for revenue growth? >> the markets already knew this stuff was coming in the pike. the stock has moved up over 20% in the last six or seven trading days. it is not like this is a surprise. typically, i'm from the school of "buy the rumor, sell the news." now that the news is out, i want to take a shot at the short side because i think the risk-reward model lays out better on selling. couldd news tomorrow breed some tension in the market. we get some pressure on the market that we have today and and pressure that this -- this trade could be a big winner. have to change for you to buy a call on this? >> i want to see the stock go
back down to about $45 or $46, where he just broke out from. if you look at a chart, you will see that we have peaked out a little bit today. we are kind of at a double top. for it to come back down to that level, then i would be a willing participant to buy. >> thank you for joining us. "on thebe back again markets" in 30 minutes. in the meantime, "lunch money" is next. ♪ ..
>> welcome to lunch money, where we tied together the best stories, interviews, and video in business news. but take a look at the menu. begins aal reserve two-day meeting. in media, we meet three startups at the center of the online television revolution. a wild card, do you want to hang up with world-class athletes? it's easier than you think but it may cost you. and we're going to hear from one of the biggest names in the business. finally, in sports, the winter olympics are less than two months away and we are going to catch up